This is an all to Common Credit Repair Mistake

It might seem logical that if you pay your bills in collection, your scores will increase.


road-to-good-creditYour recent payment history is far more important than your past, more mature payment history. In fact, collection accounts only minimally hurt your scores after two years, and are all but erased after another four years. Each time you make a payment on a collection account, the payment renews the activity, damages your scores, and restarts the seven-year period in which the item will remain on your credit reports. In some states, payments restart the statute of limitations on when the creditor can sue you.

If you have collections that haven’t actively reported within the last 12 months and you pay them, your scores may drop.

Actually paying collections improperly can have little or no positive impact on credit scores for the simple reason that: It is not the amount owed hurting the scores, but rather the status of the account and the DOLA (date of last activity), which on older collections, is updated upon paying. Which in turn, may lower your credit scores.

Credit repair way to address a collection

That said paying a bill in collection is always the right thing to do. It is your responsibility to pay your debts. So what should you do?

1st: Validate for deletion

Under federal law any account that is inaccurate, outdated, unverifiable or incomplete must be deleted or updated. Now keep in mind if the collection is deleted from the credit reports it may still be legally collectible. It’s just no longer on your credit reports and having a negative impact on your credit scores.

2nd: Negotiate with leverage

Sometimesthe validation process (important in credit repair) will result in one or two of the three credit bureaus responding with different results. For example Trans Union may delete the account in question while Equifax verifies that the account is valid. If this happens under federal law, this account is believed to be inaccurate and you can now ask for a deletion of this account from all three credit bureaus as part of a settlement agreement.

If the collector refuses to delete the account as part of the settlement arrangement you would then want to ask to have the account show paid in full and closed with no negative payment history reporting. This is important in credit repair.

3rd: Pay at Closing

If the collection has been verified as accurate and the collector is not willing to delete or update the collection as part of the settlement, then we recommend paying the collection and giving proof of payment to your lender. This will allow your loan to be processed before the collection status updates and lowers the scores. Paying collections when in the process of credit repair can be a real tricky process. Paying an older collection improperly can seriously damage your credit.

Other items to consider when settling debts:

  1. Contact the creditor and see if new payments can be set up in exchange for removing the old late history and possibly reporting of new positive payment history.
  2. Deal only in writing with creditors. No matter the agreement, get it in writing before you pay.

Conclusion on settling debts and credit repair

Credit repair can be a tricky process especially when paying collections. Don’t give up on the credit repair process though as once it’s complete you will reap the benefits of credit repair for years to come.